SC 13D/A

UNITED STATES	OMB APPROVAL
SECURITIES AND EXCHANGE COMMISSION	OMB Number: 3235-0145
Washington, D.C. 20549	Expires: February 28, 2009
	Estimated average burden
SCHEDULE 13D	hours per response. . 14.5

Under the Securities Exchange Act of 1934
(Amendment No. 5)*

Tier Technologies, Inc.

(Name of Issuer)

Common Stock, $0.01 par value per share

(Title of Class of Securities)

88650Q100

(CUSIP Number)

Michael R. Murphy

Discovery Group I, LLC

191 North Wacker Drive

Suite 1685

Chicago, Illinois 60606

Telephone Number: (312) 265-9600

(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)

December 3, 2008

(Date of Event Which Requires Filing of this Statement)

If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. o

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See §240.13d-7 for other parties to whom copies are to be sent.

^* The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).

CUSIP No.   88650Q100
	1.	Names of Reporting Persons. Discovery Equity Partners, L.P.
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) WC
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o
	6.	Citizenship or Place of Organization Illinois
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power None.
			8.	Shared Voting Power 1,684,608
			9.	Sole Dispositive Power None.
			10.	Shared Dispositive Power 1,684,608
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,684,608
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)   o
	13.	Percent of Class Represented by Amount in Row (11) 8.5%
	14.	Type of Reporting Person (See Instructions) PN

2

CUSIP No.   88650Q100
	1.	Names of Reporting Persons. Discovery Group I, LLC
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) AF
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o
	6.	Citizenship or Place of Organization Delaware
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power None.
			8.	Shared Voting Power 1,957,563
			9.	Sole Dispositive Power None.
			10.	Shared Dispositive Power 1,957,563
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,957,563
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)   o
	13.	Percent of Class Represented by Amount in Row (11) 9.9%
	14.	Type of Reporting Person (See Instructions) OO

3

CUSIP No.   88650Q100
	1.	Names of Reporting Persons. Daniel J. Donoghue
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) AF
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o
	6.	Citizenship or Place of Organization United States of America
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power None.
			8.	Shared Voting Power 1,957,563
			9.	Sole Dispositive Power None.
			10.	Shared Dispositive Power 1,957,563
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,957,563
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)   o
	13.	Percent of Class Represented by Amount in Row (11) 9.9%
	14.	Type of Reporting Person (See Instructions) IN

4

CUSIP No.   88650Q100
	1.	Names of Reporting Persons. Michael R. Murphy
	2.	Check the Appropriate Box if a Member of a Group (See Instructions)
		(a)			o
		(b)			o
	3.	SEC Use Only
	4.	Source of Funds (See Instructions) AF
	5.	Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e)     o
	6.	Citizenship or Place of Organization United States of America
Number of Shares Beneficially Owned by Each Reporting Person With			7.	Sole Voting Power None.
			8.	Shared Voting Power 1,957,563
			9.	Sole Dispositive Power None.
			10.	Shared Dispositive Power 1,957,563
	11.	Aggregate Amount Beneficially Owned by Each Reporting Person 1,957,563
	12.	Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions)   o
	13.	Percent of Class Represented by Amount in Row (11) 9.9%
	14.	Type of Reporting Person (See Instructions) IN

5

Item 1.	Security and Issuer
	This Amendment No. 5 to Schedule 13D (“Amendment No. 5”) relates to the Common Stock, par value $0.01 per share (the “Common Stock”), of Tier Technologies, Inc., a Delaware corporation (the “Company”), which has its principal executive offices at 10780 Parkridge Boulevard, Suite 400, Reston Virginia 20191.  This Amendment No. 5 amends and supplements, as set forth below, the information contained in items 1, 3, 4, 5 and 6 of the Schedule 13D filed by the Reporting Persons with respect to the Company on May 12, 2008, as amended by Amendment No. 1 thereto filed by the Reporting Persons on August 20, 2008, Amendment No. 2 thereto filed by the Reporting Persons on September 9, 2008, Amendment No. 3 thereto filed by the Reporting Persons on October 20, 2008 and Amendment No. 4 thereto filed by the Reporting Persons on October 31, 2008 (as so amended, the “Schedule 13D”).  All capitalized terms used herein but not defined herein have the meanings set forth in the Schedule 13D.  Except as amended by this Amendment No. 5, all information contained in the Schedule 13D is, after reasonable inquiry and to the best of the Reporting Persons’ knowledge and belief, true, complete and correct as of the date of this Amendment No. 5.
Item 3.	Source and Amount of Funds or Other Consideration
	Item 3 of the Schedule 13D is hereby amended to read in its entirety as follows: The total purchase price for the 1,957,563 shares of Common Stock beneficially owned by Discovery Group and Messrs. Donoghue and Murphy as of December 3, 2008 was approximately $16,243,807, and the total purchase price for the 1,684,608 shares of Common Stock beneficially owned by Discovery Equity Partners was approximately $13,989,804.  The source of such funds was the assets of Discovery Equity Partners and another private investment partnership (collectively, the “Partnerships”) over which Discovery Group exercises discretionary investment management authority, including proceeds of margin loans under margin loan facilities maintained in the ordinary course of business by the Partnerships with a broker on customary terms and conditions.  No margin loans secured by the shares of Common Stock beneficially owned by the Reporting Persons remain outstanding on the date hereof. The Partnerships are the legal owner of all of the Common Stock beneficially owned by Discovery Group and Messrs. Donoghue and Murphy.
Item 4.	Purpose of Transaction
	Item 4 of the Schedule 13D is hereby amended by adding the following as the sixth, seventh and eighth paragraphs thereof: On December 3, 2008, Discovery Equity Partners sent to the Company a notice pursuant to the Company’s Amended and Restated Bylaws notifying the Company that Discovery Equity Partners proposes to nominate Daniel J. Donoghue and Michael R. Murphy for election to the Board of Directors of the Company at the Company’s 2009 Annual Meeting of Stockholders.  The notice provided to the Company information concerning Messrs. Donoghue and Murphy and certain other matters required by the Bylaws. Together with the notice, Discovery Equity Partners sent a letter addressed to the Board of Directors of the Company (the “Board”) dated December 3, 2008 (the “Letter”) setting forth Discovery Equity Partners’ reasons for such nominations.  A copy of the Letter is included as Exhibit 1 to this Amendment No. 5 and is incorporated by reference herein, and the description of the Letter contained in this Amendment No. 5 is qualified in its entirety by reference to the full text of the Letter.  In the Letter, Discovery Equity Partners stated, among other things, that it believes that the Company's shares are trading at a significant discount to the Company's true value and that the discount is due to investors' lack of confidence in the current Board's ability to deliver value to shareholders.  Discovery Equity Partners further stated its view that the Board has overseen several years of operating losses, has fostered a culture with excessive corporate overhead, has not unlocked the value of the Company's primary Electronic Payment Processing business, has hoarded cash, and has entrenched itself to prevent a sale of the business, and that the Directors’ interests are not well aligned with shareholders as their collective ownership of Company stock is insignificant.  Discovery Equity Partners also stated in the Letter that it is not seeking control of the Board but that it is nominating its own experienced corporate finance professionals to the Board to provide the needed perspective of a large institutional investor and to work with other members of the Board to take proactive steps to initiate change. Discovery Equity Partners also issued a press release dated December 4, 2008 regarding its intention to nominate Messrs. Donoghue and Murphy for election to the Board, a copy of which press release is included as Exhibit 2 to this Amendment No. 5.

6

Item 5.	Interest in Securities of the Issuer
	Item 5 of the Schedule 13D is hereby amended to read in its entirety as follows: The information concerning percentages of ownership set forth below is based on 19,734,863 shares of Common Stock reported outstanding as of September 30, 2008 in the Company’s amendment to its Quarterly Report on Form 10-Q for the period ended June 30, 2007, filed with the Securities and Exchange Commission on November 3, 2008. Discovery Equity Partners beneficially owns 1,684,608 shares of Common Stock as of December 3, 2008, which represents 8.5% of the outstanding Common Stock. Discovery Group beneficially owns 1,957,563 shares of Common Stock as of December 3, 2008, which represents 9.9% of the outstanding Common Stock. Mr. Donoghue beneficially owns 1,957,563 shares of Common Stock as of December 3, 2008, which represents 9.9% of the outstanding Common Stock. Mr. Murphy beneficially owns 1,957,563 shares of Common Stock as of December 3, 2008, which represents 9.9% of the outstanding Common Stock. Discovery Group is the sole general partner of Discovery Equity Partners and has sole discretionary investment authority with respect to the other Partnership’s investment in the Common Stock.  Messrs. Donoghue and Murphy are the sole managing members of Discovery Group.  As a consequence, Discovery Group and Messrs. Donoghue and Murphy may be deemed to share beneficial ownership of all of the shares of Common Stock owned by both of the Partnerships, while Discovery Equity Partners shares beneficial ownership with Discovery Group and Messrs. Donoghue and Murphy of only the shares of Common Stock owned by it. The transactions in Common Stock effected by the Reporting Persons since the date of the most recent filing on Schedule 13D are set out in Exhibit 3 hereto. No person other than the Partnerships is known to any Reporting Person to have the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, any of the shares of Common Stock reported herein.
Item 6.	Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer
	Item 6 of the Schedule 13D is hereby amended to read in its entirety as follows: There are no contracts, arrangements, understandings or relationships (legal or otherwise) between or among any of the Reporting Persons and any other person with respect to any securities of the Company other than the governing documents of Discovery Group and the Partnerships, the Joint Filing Agreements of the Reporting Persons with respect to the Schedule 13D that were included as exhibits thereto, the Joint Filing Agreement of the Reporting Persons with respect to this Amendment No. 5 included as Exhibit 4 to this Amendment No. 5, and the Powers of Attorney granted by Messrs Donoghue and Murphy with respect to reports under Section 13 of the Securities Exchange Act of 1934, as amended, which Powers of Attorney are included as Exhibit 5 and Exhibit 6, respectively, to this Amendment No. 5.
Item 7.	Material to be Filed as Exhibits
	Exhibit 1:              Letter dated December 3, 2008 of Discovery Equity Partners to the Board of Directors of the Company. Exhibit 2               Press Release dated December 4, 2008 of Discovery Equity Partners. Exhibit 3:              List of transactions by Reporting Persons in the Company’s Common Stock since the date of the most recent filing on Schedule 13D. Exhibit 4:              Joint Filing Agreement dated as of December 4, 2008, by and among Discovery Equity Partners; Discovery Group; Daniel J. Donoghue; and Michael R. Murphy. Exhibit 5:              Power of Attorney of Daniel J. Donoghue, dated as of April 28, 2008. Exhibit 6:              Power of Attorney of Michael R. Murphy, dated as of April 28, 2008.

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Signature

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

December 4, 2008

Date

DISCOVERY GROUP I, LLC,
for itself and as general partner of
DISCOVERY EQUITY PARTNERS, L.P.

By:  Michael R. Murphy*

Signature

Michael R. Murphy, Managing Member

Name/Title

Daniel J. Donoghue*

Signature

Daniel J. Donoghue

Name/Title

Michael R. Murphy*

Signature

Michael R. Murphy

Name/Title

*By: /s/ Mark Buckley

Mark Buckley
Attorney-in-Fact for Daniel J. Donoghue
Attorney-in-Fact for Michael R. Murphy

8

Exhibit Index

Exhibit 1:	Letter dated December 3, 2008 of Discovery Equity Partners to the Board of Directors of the Company.
Exhibit 2:	Press Release dated December 4, 2008 of Discovery Equity Partners.
Exhibit 3:	List of transactions by Reporting Persons in the Company’s Common Stock since the date of the most recent filing on Schedule 13D.
Exhibit 4:	Joint Filing Agreement dated as of December 4, 2008, by and among Discovery Equity Partners; Discovery Group; Daniel J. Donoghue; and Michael R. Murphy.
Exhibit 5:	Power of Attorney of Daniel J. Donoghue, dated as of April 28, 2008.
Exhibit 6:	Power of Attorney of Michael R. Murphy, dated as of April 28, 2008.

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EX-99.1

EXHIBIT 1

	Michael R. Murphy
	Managing Partner
	1 312 265 9605
	mmurphy@thediscoverygroup.com

December 3, 2008

The Board of Directors

Tier Technologies, Inc.

10780 Parkridge Boulevard

Suite 400

Reston, VA 20191

Dear Tier Directors:

Discovery Equity Partners, L.P. (together with its affiliates, “Discovery”) is nominating two of our professionals to serve on the Tier Technologies, Inc. (“Tier”) Board of Directors to represent the interests of all fellow shareholders.  Discovery is motivated by specific, tangible opportunities that exist to greatly increase shareholder value and that are being ignored by the current Tier Board.  This letter will provide background on the governance crisis that has evolved at Tier and explain why stockholders deserve fellow investors to act as new representatives to enhance their investment.

Discovery

Discovery (www.thediscoverygroup.com/tier.htm) manages investment funds that own approximately 9.9% of the outstanding shares of Tier Technologies.  Discovery has a very successful record of investing in the payment processing sector and we have followed Tier closely for several years.  Since building our initial investment position in 2007 we have had numerous meetings and conversations with past and present members of management and the Board of Directors.  We believe we are the second largest shareholder of the Company.  Discovery has invested over $16 million in Tier and the position is one of our most important holdings.

Tier Board’s Failures

Discovery believes that Tier’s shares are trading at a significant discount to the company’s true value.  We believe that the discount is due to investors’ lack of confidence in the current Board’s ability to deliver value to shareholders.  The Tier Board has overseen several years of operating losses, has fostered a culture with excessive corporate overhead, has not unlocked the value of Tier’s primary Electronic Payment Processing or “EPP” business, has hoarded cash, and has entrenched itself to prevent a sale of the business.  Furthermore, the Directors’ interests are not well aligned with shareholders as their collective ownership of Tier stock is insignificant.  Due to this continued poor oversight, Discovery is nominating its own experienced corporate finance professionals to the Tier Board.  Discovery is not seeking control of the Tier board.  However our nominees, if elected, will provide the needed perspective of a large institutional investor and work with other members of the Tier Board to take proactive steps to initiate change.  The election of Discovery’s nominees will act as a referendum for shareholders to express a desire for more expeditious and effective pursuit of shareholder value.

191 N. Wacker Drive, Suite 1685, Chicago, IL 60606

Tier Directors

December 3, 2008

Page 2

The Board Has Supervised Mismanagement and Losses

The current Board has overseen a culture of poor management and a long history of operating losses.  The table below in Table A, taken directly from the Company’s most recent 10-K, shows Tier’s lack of profitability for the past 5 Fiscal Years.

TABLE A

	Fiscal year ended September 30,
(in thousands)	2003			2004			2005			2006			2007
Revenues	$	51,779		$	61,948		$	78,695		$	96,492		$	111,148
Costs and expenses	$	81,343		$	83,503		$	98,936		$	118,825		$	133,425
Loss before discontinued and other income (loss)	$	(29,564	)	$	(21,555	)	$	(20,241	)	$	(22,333	)	$	(22,277	)
Other Income	$	904		$	835		$	874		$	3,457		$	4,094
Loss before income taxes & discontinued operations	$	(28,660	)	$	(20,720	)	$	(19,367	)	$	(18,876	)	$	(18,183	)
Income tax provision (benefit)	$	(2,764	)	$	—		$	127		$	45		$	76
Loss from continuing operations	$	(25,896	)	$	(20,720	)	$	(19,494	)	$	(18,921	)	$	(18,259	)
Income from discontinued operations, net	$	20,460		$	20,657		$	20,620		$	9,470		$	15,225
Net (loss) income	$	(5,436	)	$	(63	)	$	1,126		$	(9,451	)	$	(3,034	)

A series of 12 acquisitions from 1998 to 2002 were poorly integrated and Tier struggled to produce profits as a small conglomerate.  These struggles led to earnings manipulation, accounting irregularities in 2005, a Nasdaq de-listing and SEC investigation in 2006, and the need for a severe strategic restructuring.  Tier’s CEO was replaced in May, 2006 by Ron Rossetti, a Director since 1995. Rather than act as an agent of change, Mr. Rossetti has perpetuated the culture of mediocrity that prevailed during his preceding Board tenure.  Since 2006, despite an attempt to restructure the business, Tier has continued to generate significant losses for shareholders.

The Board Has Not Delivered Value for Shareholders

As a result of poor oversight and ineffective decisions, the Tier Board has not been able to generate value for shareholders. Tier’s stock has languished in a range of $6.00 to $9.00 for the past 4 years, as shown below in the stock price graph in Table B.  For a brief period in mid 2007, Tier stock traded over $10.00.  This occurred shortly after Tier became current with SEC filings, was re-listed on Nasdaq, and made progress on divesting non-core businesses.  Many investors wrongly assumed that Tier would also begin the process of reducing overhead and pursuing action toward a sale of the company.

In late 2007, Tier reported segment results disclosing for the first time the magnitude of the company’s inefficient level of corporate overhead.  Tier stock began dropping.  Shortly thereafter the Board made clear its intention to remain independent instead of selling EPP or the entire company.  Investors were further disappointed, dissenting directors resigned from the Board, and several senior executives departed.  Tier’s stock has declined steadily and is currently trading below $5.00.

2

Tier Directors

December 3, 2008

Page 3

TABLE B

Stock Price Graph: Dec. 13, 2004 through Dec. 1, 2008

The Board Cannot Deliver Value for EPP as a Stand-Alone Entity

Tier’s primary business today is the EPP segment.  EPP provides government and public-sector clients with an electronic payment processing alternative for collecting taxes and other fees.  EPP generates high growth and good margins as a stand-alone business segment, as shown below in Table C.

TABLE C

	Fiscal Years Ending
$ in thousands; FYE 9/30	2005			2006			2007			2008(b)
EPP Gross Revenue	$	56,452		$	78,578		$	99,433		$	117,053
Growth				39.2		%	26.5		%	17.7		%
Cost of Sales	42,199			59,966			75,294			88,375
Gross Profit	14,253			18,612			24,139			28,678
Gross Margin	25.2		%	23.7		%	24.3		%	24.5		%
EPP Operating Expenses (a)	12,940			15,142			18,203			21,175
As % of Revenue	22.9		%	19.3		%	18.3		%	18.1		%
Operating Income (a)	1,313			3,470			4,638			8,173
Operating Margin	2.3		%	4.4		%	4.7		%	7.0		%
D&A	3,428			3,170			3,205			3,500
EBITDA (a)	4,741			6,640			7,843			11,673
EBITDA Margin	8.4		%	8.5		%	7.9		%	10.0		%

(a) Excludes All Corporate Overhead

(b) FY 2008 estimated by Discovery based on Tier management guidance

3

Tier Directors

December 3, 2008

Page 4

Unfortunately, Tier’s very large corporate overhead overwhelms the positive earnings generated by EPP.  Tier’s corporate overhead of over $16 million per year offsets all of EPP’s profits.  According to Tier, the current management team will only reduce this amount by approximately $4 million in 2009 and another $2 million in 2010.  Tier claims that the remaining $10 million of expenses are the unavoidable costs of being public.  This claim exposes the Tier culture of poor stewardship.  Consider that a recent independent study of the cost of being public for companies that are much larger than Tier – up to $1 billion in revenue – shows an average cost of only $2.8 million per year for expenses such as Audit, Legal, Board Compensation, D&O Insurance and other corporate overhead.(1)

Discovery believes that Tier’s excessive overhead expenses are unacceptable.  We disagree with the current Board’s strategy to let Tier generate losses for several more years.  Unfortunately, the current Tier Board appears to believe ongoing losses are not only acceptable but the best alternative for shareholders.

The Board is Hoarding Cash

The Board’s disservice to shareholders is also evident when considering the company’s unusually large cash balance.  Tier’s latest 10Q shows $94 million in cash and a recent Company presentation estimated a cash balance of $90 million as of September, 2008.  This equates to over $4.50 per share of Tier stock.  The company has hoarded cash for years instead of distributing capital through a share repurchase or special dividend.  Institutional shareholders have made repeated pleas for the Board to return them their excess capital, but the Board has ignored their requests.  Instead, the excess cash was invested in auction rate securities that are now illiquid.  Investors have become so wary of the Tier Board’s decisions and actions that the market currently ascribes a value of less than $100 million to a company that has i) $90 million of cash, and ii) an operation that is generating over $11 million in EBITDA before corporate overhead expenses.

Board and CEO Are Entrenched

One strategy to unlock the value of EPP is to sell Tier to one of the many strategic parties that are interested in acquiring the business.  A strategic buyer could quickly eliminate Tier’s excessive corporate overhead and even add to EPP’s growth and profitability.  Because of these obvious benefits to a buyer, the right transaction could deliver a handsome premium to Tier shareholders.  Unfortunately, Tier’s Board has resisted this logical outcome for the past several years and has even entrenched itself against logical suitors.

·In January, 2006, Tier adopted a poison pill and removed the rights of shareholders owning 10% or more of the company to call a special meeting.  These important governance changes were made unilaterally, without the consent of shareholders.  CEO Rossetti later told Discovery that if it wasn’t for the poison pill Tier would no longer be independent.

·In late 2006, the large shareholder Parthenon (a.k.a. Giant) attempted to enter into good faith negotiations with Tier regarding an acquisition of Tier in order to combine the business with an existing portfolio company.  When discussions failed, Parthenon asked Tier to pursue all strategic alternatives available to shareholders but no process was conducted.

·In 2007, during divestitures of non-core businesses, Tier management told Discovery that several parties were interested in acquiring EPP or Tier as a whole.  Management further commented that they were focused on divesting the unwanted businesses and would not entertain other discussions.

(1) See August 2, 2007 publication by Foley & Lardner LLP, “The Cost of Being Public in the Era of Sarbanes-Oxley.”

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Tier Directors

December 3, 2008

Page 5

·In 2008, Discovery suggested to Tier that it pursue a proactive sale of the business in order to deliver value for all shareholders.  This recommendation was based on the information Discovery gathered from several larger payment processing companies that expressed an interest in acquiring the business.  Chairman Rossetti’s response was that “The chances of me selling this business by year end are zero-to-none.”

·In late 2008, after further discussions with strategic buyers, Discovery learned that otherwise interested acquirers were receiving clear signals from Tier that the company did not intend to pursue a sale.

It is not surprising that Tier has not received any unsolicited offers to acquire the company.  Any management team or Board unwilling to sell can easily dissuade interested buyers from holding the constructive discussions that are a prerequisite for a premium offer.

From our contacts in the industry we know that there are logical, qualified, and very interested buyers that will pay a premium for Tier.  However, in order to determine the ultimate value of a company, acquirers need to have access to the company and Tier’s management must be receptive. Virtually no acquirer is willing to be painted as a hostile party. Very few will make an offer and fight a company that is entrenched and ready to employ defenses. Tier’s EPP business is a prized asset, but it is not worth the excessive time, legal costs, and reputational risk that would come with a litigious takeover battle.

The Board is Not Aligned with Shareholders

The Tier Board’s complacency with regard to ongoing losses, hoarding of cash and avoidance of a sale is not surprising given Tier’s ownership structure.   No Director or officer beneficially owns more than 2% of the outstanding stock and the ownership level is de minimis if granted options are excluded from the calculation as shown below in Table D.  In addition, Chairman Rossetti’s generous employment contracts have resulted in salary, bonus, and prerequisite payments (excluding equity compensation) since May, 2006 that exceed $3,000,000.  There seems to be little incentive for Directors to take steps to increase shareholder value that might risk the loss of their positions or perquisites.  This is one of the key reasons why Discovery believes that institutional owners deserve new representation on the Tier Board.

TABLE D

	Number of Shares Held (1)	% Outstanding Common Stock		Options & Warrants	Total Beneficial Ownership	% Fully Diluted Common Stock
Executive Officers and Directors (1)
Ronald L. Rossetti (Chairman, CEO)	27,365	0.1	%	420,000	447,365	2.0	%
Samuel Cabot III (Director)	19,810	0.1	%	200,000	219,810	1.0	%
Ronald Johnston (CFO)	—	0.0	%	200,000	200,000	0.9	%
Morgan P. Guenther (Director)	1,000	0.0	%	150,000	151,000	0.7	%
Charles W. Berger (Director)	—	0.0	%	140,000	140,000	0.6	%
Keith Kendrick (SVP, Strategic Marketing)	—	0.0	%	100,000	100,000	0.4	%
John J. Delucca (Director)	—	0.0	%	40,000	40,000	0.2	%
James R. Stone (Director)	—	0.0	%	38,337	38,337	0.2	%
Philip Heasley (Director)	—	0.0	%	10,002	10,002	0.0	%
David Poe (Director)	—	0.0	%	6,668	6,668	0.0	%
Total (10 persons)	48,175	0.2	%	1,305,007	1,353,182	6.1	%

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Tier Directors

December 3, 2008

Page 6

The Board Has Had An Opportunity to Deliver Value

The Tier Board consists of eight Directors, four of whom have had an opportunity to serve shareholders for a very long period.  Mr. Rossetti has been a Director for 14 years, Mr. Cabot has been a Director for 12 years, Mr. Guenther has been a Director for 9 years, and Mr. Berger has been a Director for 7 years.  These tenured Directors have overseen a long period of significant losses and have not shown an ability to create value for shareholders.  Three other Directors have served on the Tier Board in recent years, but all three either resigned or did not seek re-election.  The other four current directors joined Tier more recently (Mr. Delucca and Mr. Stone in 2007, Mr. Heasley and Mr. Poe in 2008). Discovery has not been allowed to meet with the newest Directors, but we hope that their fresh perspectives and industry experience prove to be beneficial to shareholders.  Nevertheless, none of the current Directors bring the perspective of an institutional investor and they have little or no capital invested in Tier.

Solution: Vote for Discovery Directors

Discovery is nominating two of its own professionals to the Tier Board in order to advance the interests of all shareholders.  The two Nominees have extensive experience as executives of financial institutions, advisors to public and private companies, founders of a successful investment firm, publishers of research on small capitalization public companies, valuation experts and leaders of M&A transactions.  Discovery’s $16 million invested in 9.9% of Tier is an important investment and the position will align Discovery with all fellow shareholders.

The Nominees are not seeking control of the Tier Board.  Rather, if elected, the Nominees intend to bring much needed perspective as a large investor and to work constructively with the other members of the Tier Board, as well as the existing Tier management team.  Discovery intends to help Tier expeditiously reduce excessive overhead, determine the appropriate amount of capital to return to shareholders, eliminate unnecessary corporate defenses, and proactively evaluate all strategic alternatives to unlock the value of EPP for all Tier shareholders.

Sincerely,

DISCOVER EQUITY PARTNERS, L.P.

By:	Discovery Group I, LLC,
	its General Partner
By:	/s/ Michael R. Murphy
	Michael R. Murphy
	Managing Member

6

Tier Directors

December 3, 2008

Page 7

SPECIAL NOTE TO TIER TECHNOLOGIES, INC. STOCKHOLDERS

In connection with the upcoming 2009 Annual Meeting of Stockholders of Tier Technologies, Inc. (“Tier”), Discovery Equity Partners, L.P. and certain related parties (“Discovery”) may file a proxy statement with the Securities and Exchange Commission (the “SEC”) to solicit stockholders of Tier with respect to the election of directors and one or more stockholder proposals.

TIER STOCKHOLDERS ARE STRONGLY ADVISED TO READ THE PROXY STATEMENT WHEN AND IF AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.

Tier stockholders may obtain a free copy of the proxy statement and other material (when and if available) and any other documents that may be filed by Discovery in connection with the 2009 Annual Meeting of Stockholders of Tier for free at the Internet website maintained by the SEC at www.sec.gov.  In addition, if the proxy statement is filed, Discovery will make additional copies of the proxy statement and any amendments to the proxy statement available for free to the stockholders of Tier.  Please direct your request for the proxy statement to Discovery Group, 191 North Wacker Drive, Suite 1685, Chicago, IL 60606, Attention: Michael Murphy, Tel.: (312) 265-9600.

In accordance with Rule 14a-12(a)(1)(i) of the Securities Exchange Act of 1934, as amended, the persons who may be deemed participants in any proxy solicitation in connection with Tier’s 2009 Annual Meeting of Stockholders that Discovery may engage in are as follows: Discovery Equity Partners, L.P., Discovery Group I, LLC., Daniel J. Donoghue and Michael R. Murphy.  The number of shares of Tier common stock beneficially owned by these persons as of December 3, 2008 are as follows: Discovery Equity Partners, L.P. (1,684,608), Discovery Group I, LLC (1,957,563), Daniel J. Donoghue (1,957,563) and Michael R. Murphy (1,957,563).

7

EX-99.2

EXHIBIT 2

For Immediate Release Thursday, December 4, 2008

Discovery Nominates Two New Directors to Serve on Tier Board

Chicago, IL – Discovery Equity Partners announced today that it intends to nominate two candidates for election to the Board of Tier Technologies (Nasdaq “TIER”) at Tier’s 2009 Annual Meeting of Stockholders, expected to take place in February, 2009.  Discovery manages funds that own 9.9% of Tier’s outstanding stock.

Discovery expects its two nominees, Daniel J. Donoghue and Michael R. Murphy, both executives at Discovery, to bring the much needed perspective of a large shareholder to the Tier Board of Directors.  The nominees plan to work to help Tier expeditiously reduce unnecessary overhead, determine the appropriate amount of excess cash to return to shareholders, eliminate structural defenses, and proactively evaluate all available strategic alternatives.

Discovery has also submitted a shareholder proposal to Tier in accordance with SEC Rule 14a-8.  This proposal will give shareholders an opportunity to vote - at the same annual meeting - to recommend the reversal of a change the Tier Board made almost 3 years ago without shareholder input or approval. The Discovery proposal allows shareholders to vote to recommend the rescission of Tier’s poison pill and the reinstatement of the right of 10% shareholders to call a special meeting.

Additional details on the nominees, Discovery, the reasons for the nomination, and the shareholder proposal can be found in filings Discovery made with the Securities and Exchange Commission at www.sec.gov and at www.thediscoverygroup.com/tier.htm.

About The Discovery Group

Discovery Group is a merchant banking firm that manages private partnerships in highly specialized investment strategies and conducts corporate merger and advisory services. The business was founded in 2002 and is based in Chicago. Investors in these funds include several large university endowments, nationally-recognized charitable foundations and a variety of trusts, family offices and wealth advisors. Discovery’s corporate finance expertise extends to public and private companies in a broad range of industries.

Contact:

Meghan O’Callaghan

The Discovery Group

312-265-9596

mocallaghan@thediscoverygroup.com

SPECIAL NOTE TO TIER TECHNOLOGIES, INC. STOCKHOLDERS

In connection with the upcoming 2009 Annual Meeting of Stockholders of Tier Technologies, Inc. (“Tier”), Discovery Equity Partners, L.P. and certain related parties (“Discovery”) may file a proxy statement with the Securities and Exchange Commission (the “SEC”) to solicit stockholders of Tier with respect to the election of directors and one or more stockholder proposals.

TIER STOCKHOLDERS ARE STRONGLY ADVISED TO READ THE PROXY STATEMENT WHEN AND IF AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION.

Tier stockholders may obtain a free copy of the proxy statement and other material (when and if available) and any other documents that may be filed by Discovery in connection with the 2009 Annual Meeting of Stockholders of Tier for free at the Internet website maintained by the SEC at www.sec.gov.  In addition, if the proxy statement is filed, Discovery will make additional copies of the proxy statement and any amendments to the proxy statement available for free to the stockholders of Tier.  Please direct your request for the proxy statement to Discovery Group, 191 North Wacker Drive, Suite 1685, Chicago, IL 60606, Attention: Michael Murphy, Tel.: (312) 265-9600.

In accordance with Rule 14a-12(a)(1)(i) of the Securities Exchange Act of 1934, as amended, the persons who may be deemed participants in any proxy solicitation in connection with Tier’s 2009 Annual Meeting of Stockholders that Discovery may engage in are as follows: Discovery Equity Partners, L.P., Discovery Group I, LLC., Daniel J. Donoghue and Michael R. Murphy.  The number of shares of Tier common stock beneficially owned by these persons as of December 3, 2008 are as follows: Discovery Equity Partners, L.P. (1,684,608), Discovery Group I, LLC (1,957,563), Daniel J. Donoghue (1,957,563) and Michael R. Murphy (1,957,563).

- End -

EX-99.3

EXHIBIT 3

TRANSACTIONS SINCE THE DATE OF THE MOST RECENT FILING ON SCHEDULE 13D

The Reporting Persons engaged in the following transactions in shares of Common Stock of the Company since the date of the most recent filing on Schedule 13D.  Such transactions involved the purchase of shares on the Nasdaq National Market System.

Date	Type	Price		Shares
11/3/2008	Purchase	$	6.47	1800
11/3/2008	Purchase	6.65		1400
11/4/2008	Purchase	6.30		500
11/4/2008	Purchase	6.385		100
11/4/2008	Purchase	6.39		100
11/4/2008	Purchase	6.4125		100
11/4/2008	Purchase	6.42		100
11/4/2008	Purchase	6.44		100
11/4/2008	Purchase	6.445		200
11/4/2008	Purchase	6.45		1200
11/5/2008	Purchase	5.83		754
11/5/2008	Purchase	6.00		2000
11/5/2008	Purchase	6.07		500
11/5/2008	Purchase	6.08		1000
11/5/2008	Purchase	6.10		1100
11/6/2008	Purchase	5.83		500
11/6/2008	Purchase	5.66		100
11/6/2008	Purchase	5.69		200
11/6/2008	Purchase	5.675		100
11/6/2008	Purchase	5.665		800
11/6/2008	Purchase	5.625		100
11/6/2008	Purchase	5.6075		100
11/6/2008	Purchase	5.614		100
11/6/2008	Purchase	5.63		100
11/6/2008	Purchase	5.66		100
11/6/2008	Purchase	5.62		100
11/6/2008	Purchase	5.65		1000
11/6/2008	Purchase	5.65		1000
11/6/2008	Purchase	5.61		540
11/7/2008	Purchase	5.55		2000
11/7/2008	Purchase	5.61		1000
11/10/2008	Purchase	5.45		1000
11/10/2008	Purchase	5.46		1000
11/11/2008	Purchase	5.50		1000

Date	Type	Price		Shares
11/11/2008	Purchase	$	5.53	100
11/11/2008	Purchase	5.54		400
11/11/2008	Purchase	5.55		200
11/12/2008	Purchase	5.25		100
11/12/2008	Purchase	5.28		300
11/12/2008	Purchase	5.36		1000
11/12/2008	Purchase	5.41		800
11/13/2008	Purchase	5.08		48
11/13/2008	Purchase	5.19		300
11/13/2008	Purchase	5.20		700
11/14/2008	Purchase	5.20		100
11/14/2008	Purchase	5.25		1800
11/14/2008	Purchase	5.28		200
11/18/2008	Purchase	5.00		6500
11/18/2008	Purchase	5.10		1000
11/19/2008	Purchase	5.00		1958
11/20/2008	Purchase	4.78		100
11/20/2008	Purchase	4.67		100
11/20/2008	Purchase	4.69		100
11/20/2008	Purchase	4.685		100
11/20/2008	Purchase	4.68		100
11/20/2008	Purchase	4.7025		100
11/20/2008	Purchase	4.68		100
11/20/2008	Purchase	4.68		100
11/20/2008	Purchase	4.68		100
11/20/2008	Purchase	4.68		100
11/20/2008	Purchase	4.695		32
11/20/2008	Purchase	4.68		100
11/20/2008	Purchase	4.73		100
11/20/2008	Purchase	4.7325		100
11/20/2008	Purchase	4.76		2500
11/20/2008	Purchase	4.91		100
11/20/2008	Purchase	4.67		185
11/20/2008	Purchase	4.78		300
11/20/2008	Purchase	4.85		2500
11/20/2008	Purchase	4.96		100
11/20/2008	Purchase	4.93		100
11/20/2008	Purchase	4.955		100
11/20/2008	Purchase	4.95		100
11/20/2008	Purchase	4.83		100
11/20/2008	Purchase	4.90		83
11/20/2008	Purchase	5.00		4300

EX-99.4

EXHIBIT 4

JOINT FILING AGREEMENT

The undersigned hereby agree to the joint filing of the Amendment No. 5 to Schedule 13D to which this Agreement is attached.

Dated:  December 4, 2008

DISCOVERY GROUP I, LLC
for itself and as general partner of
DISCOVERY EQUITY PARTNERS, L.P.
By	Michael R. Murphy*
	Michael R. Murphy
	Managing Member
Daniel J. Donoghue*
Daniel J. Donoghue
Michael R. Murphy*
Michael R. Murphy
*By:		/s/ Mark Buckley
		Mark Buckley
		Attorney-in-Fact for Daniel J. Donoghue
		Attorney-in-Fact for Michael R. Murphy

EX-99.5

EXHIBIT 5

POWER OF ATTORNEY

The undersigned, Daniel J. Donoghue, hereby appoints Mark Buckley his true and lawful attorney-in-fact and agent, with full power to execute and file with the United States Securities and Exchange Commission and any stock exchange or similar authority, for and on his behalf in any and all capacities, any and all reports required to be filed pursuant to Section 13 of the Securities Exchange Act of 1934 and the rules thereunder on Schedule 13D or 13G, any and all amendments to such reports, with all exhibits, and any other forms or documents as may be necessary in connection with the filing of such reports with the United States Securities and Exchange Commission and any stock exchange or similar authority, granting unto said attorney full power and authority to do and perform any and all acts for and on behalf of the undersigned which may be necessary or desirable to complete, as fully as the undersigned might or could do in person.

This Power of Attorney shall remain in full force and effect until revoked by the undersigned in a signed writing delivered to the foregoing attorney-in-fact and agent.

IN WITNESS WHEREOF the undersigned has caused this Power of Attorney to be executed this 28th day of April, 2008.

/s/ Daniel J. Donoghue

Daniel J. Donoghue

STATE OF ILLINOIS	)
	) SS.
COUNTY OF COOK	)

I, Kareema M. Cruz, a Notary Public in and for the County of Cook, State of Illinois, DO HEREBY CERTIFY that Daniel J. Donoghue, who is personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that he signed and delivered the said instrument as his own free and voluntary act, for the uses and purposes therein set forth.

Given under my hand and notarial seal, this 28th day of April, 2008.

/s/ Kareema M. Cruz

Notary Public

EX-99.6

EXHIBIT 6

POWER OF ATTORNEY

The undersigned, Michael R. Murphy, hereby appoints Mark Buckley his true and lawful attorney-in-fact and agent, with full power to execute and file with the United States Securities and Exchange Commission and any stock exchange or similar authority, for and on his behalf in any and all capacities, any and all reports required to be filed pursuant to Section 13 of the Securities Exchange Act of 1934 and the rules thereunder on Schedule 13D or 13G, any and all amendments to such reports, with all exhibits, and any other forms or documents as may be necessary in connection with the filing of such reports with the United States Securities and Exchange Commission and any stock exchange or similar authority, granting unto said attorney full power and authority to do and perform any and all acts for and on behalf of the undersigned which may be necessary or desirable to complete, as fully as the undersigned might or could do in person.

This Power of Attorney shall remain in full force and effect until revoked by the undersigned in a signed writing delivered to the foregoing attorney-in-fact and agent.

IN WITNESS WHEREOF the undersigned has caused this Power of Attorney to be executed this 28th day of April, 2008.

/s/ Michael R. Murphy

Michael R. Murphy

STATE OF ILLINOIS	)
	) SS.
COUNTY OF COOK	)

I, Kareema M. Cruz, a Notary Public in and for the County of Cook, State of Illinois, DO HEREBY CERTIFY that Michael R. Murphy, who is personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person and acknowledged that he signed and delivered the said instrument as his own free and voluntary act, for the uses and purposes therein set forth.

Given under my hand and notarial seal, this 28th day of April, 2008.

/s/ Kareema M. Cruz

Notary Public